30 October, 2011

How to buy a property in the UAE

How to buy a property in the UAE

Whether you’re a cash buyer or seeking a mortgage, using an agency or buying directly from a developer, here are some things you need to consider when buying a property in Dubai or Abu Dhabi.

Do your research
As with anywhere in the world, it’s important you understand the local market that you’re buying into.  If you’ve been living in the UAE for some time, this may not be too much of an issue but if you’re fairly new to the country, make sure you know everything you can about relative property values, reputed build quality, amenities, service charges etc.

Get a valuation
Always involve a surveyor to determine the fair value of the property and if possible a lawyer to ensure the same for the contract.   It is also worthwhile getting survey done by  a structural engineer so they can advise on any issues which may affect the property’s value.

Do your sums
As well as your purchase costs, you should also work out the other costs you will incur during the lifecycle of the home.  Establish how much the service fees, including maintenance and cooling charges, are going to be before purchasing. These vary widely from community to community and even tower to tower across the Emirates.

The agency
Brokers usually charge around two percent of the purchase price for their services and to avoid conflict of interest can’t charge the seller any fees as well. To protect yourself from any fraudulent activity you should only work with RERA registered agents.

The broker will take care of the negotiations with the seller on your behalf.  Once both parties have agreed on a price the buyer will be required to pay a refundable deposit of up to 10 percent of the contract value.

This money goes to the seller, but the real estate agent will hold it in their accounts until all parties have signed the sales & purchase agreement (SAP). Until that time the SAP remains an offer, or what is known as a Memorandum of Understanding (MoU), an intent highlighting the conditions of the property, price etc. to take the sale and purchase through to completion.

RERA and the land department have been talking about implementing an Escrow (trust) account for real estate brokers, where all purchase and rent monies should be held for protection. Although By-Law (No) 85 of 2006 calls upon agencies to pass on the money to the respective parties there is still little protection from potential fraudsters.  Again, you can protect yourself by only working with a RERA registered agent.

Once both parties accept the MoU, the agreement becomes a legal sale.  The agent will apply their seal to the document and the monies and property are transferred to the respective parties.  The next step for the buyer is to register the property and collect title deed from the land department.

Mortgage financing:
Property finance is available to those in Dubai and Abu Dhabi whether you’re an expat with a residence visa or a UAE national. Obtaining a mortgage in the UAE is a fairly simple process, there are a number of lenders who will assess your individual circumstances and will offer you a mortgage that suits your needs.

There are numerous banks offering mortgages; they are split between international lenders, such as HSBC, Barclays, Lloyds and Standard Chartered, and domestic banks and finance companies, such as Amlak, Tamweel and Dubai Bank.

It is worth getting an idea of how much you can borrow from potential lenders and obtain what is called a pre-approved mortgage before expressing interest in a property as this will speed up the purchase process.

Once you have chosen a property, your mortgage provider should perform a valuation and a document will be drawn up giving unconditional approval on the basis that any conditions noted in the pre-approval are satisfied.  The lender will then issue a letter of offer followed by the mortgage documentation. This will provide the terms and conditions of the mortgage and, once signed and sent back to the lender, the settlement process is started.  The process is settled when the lender has transferred the mortgage payment to either the seller or to the existing lender who has the first charge over the property.

You should be aware that the bank now owns the property, essentially leasing it to the mortgage holder, and this is how it will be registered with the land department until the mortgage is fully paid off.

Note: A UAE bank will not grant a mortgage if its length of validity takes you over the age of retirement.

Buying from a developer
Firstly, only buy from a RERA approved developer.  Buying a property off-plan involves agreeing on a payment plan linked to a construction schedule (RERA approved) and organising a mortgage if applicable.

Once the property is completed, the buyer must pay a final instalment to the developer. Before this happens the developer should offer a home viewing to establish a formal ‘snagging list’ which the developer must commit to rectifying before handover. 

Buyers can also ask to have their mortgage provider carry out an evaluation after snagging, however some developers charge for this ‘privileged access’.

The buyer pays the last instalment directly or via the mortgage provider and the developer then issues a certificate to confirm receipt of full payment.   Islamic financial institutions will send a representative, or, issue a no objection notification (NOC) to facilitate handover.

The property (and parking space if relevant) should now be transferred from the interim register at the land department to the land registry and title deed issued. This is either done by the buyer with an NOC from the developer or in some instances it will be done by the developer.

To obtain the keys to the property presenting a passport copy and the title deed application to the Land Department is usually sufficient. Some developers also want to see that DEWA has been connected, i.e. a copy of the security deposit receipt.


 
 

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